Hungarian CEOs lean towards optimism

Ninety-five percent concerned about labour shortage, ready to invest in their people’s future

For Hungarian companies, Germany remains the most important target for market growth, while Romania has climbed to second place in one year. CEOs are optimistic about the future, despite major challenges such as a labour shortage, changing workforce demographics, and an increasing tax burden on labour.

This is the seventh year that PwC Hungary has gauged the opinions of Hungarian CEOs. The survey was conducted in cooperation with the Confederation of Hungarian Employers and Industrialists (MGYOSZ). In parallel to the Hungarian survey, PwC conducted nearly 1,300 interviews with CEOs worldwide.

Half of the respondents are considering organic growth and cost reduction over the next 12 months, and although minimally, collaboration with entrepreneurs or start-ups has gained in popularity.

Eighty-nine percent of Hungarian CEOs are confident about their own revenue growth (the same as last year); their outlook for the Hungarian economy has not changed significantly, while the percentage of CEOs confident about global economic growth has increased to 47% (up from 39% last year; Figure 1).

“Last year was tough for decision makers around the world. At the beginning of the year we saw mostly the risks, but now it looks like 2017 was about stabilisation in the world economy. The United States and China gained further strength, while Russia and Brazil slowly embarked on a path to economic recovery. Concerns over the future of the Eurozone in the wake of Brexit have also eased somewhat. While last year expectations were driven by risks, this year CEOs, both in Hungary and worldwide, are rightfully optimistic in their outlook for the global economy. I expect CEOs’ optimism to continue, as we look forward to a more peaceful and predictable year,” said Nick Kós, PwC Hungary’s Country Managing Partner.

Where are CEOs turning to for growth?

Nearly half of Hungarian CEOs picked Germany as their most important foreign market, followed by Romania and the United States (Romania came up to second, while the US slipped to third place). The largest fall in rank is that of Russia. Despite the uncertainty surrounding Brexit, the UK’s importance has not diminished either in Hungary or globally. According to global CEOs, the United States once again tops the chart, widening the gap with China. (Figure 2)

“For Hungarian companies, Germany has traditionally been the most important target for market growth. Romania now ranks as the second most important country with regard to Hungarian companies’ local growth prospects. In addition to geographical proximity, the key drivers here are easier networking among the Hungarian minority, and a market twice the size of the Hungarian market,” commented economist László Urbán.

What are the biggest challenges?

While CEOs across the world are increasingly anxious about broader societal threats, according to the results of PwC’s 21st Annual Global CEO Survey revealed recently at the World Economic Forum in Davos, Hungarian CEOs are more concerned about problems in their own market, mostly in connection with their employees.

Globally, the percentage of respondents citing either terrorism or climate change as the chief threat to their growth prospects increased by 20 percentage points compared to last year.

In Hungary, the availability of key skills, changing workforce demographics, and increasing tax burden on labour are the greatest challenges to chief executives, who seem much less troubled by global problems. (Figure 3)

“The percentage of CEOs saying they would like to increase their staff numbers has been over 50% for years now. The biggest challenge, however, is what HR strategy they should put into practice to reach that goal. They recognise that in order to attract talent, companies need to make the right value proposition. As a result, many employers help their employees acquire the flexibility to meet future workplace demands. Ninety percent of respondents believe they need to strengthen soft skills (e.g. teamwork, communication) in their organisation alongside digital skills,” (Figure 4) said Anita Mekler, Tax Partner at PwC Hungary.

CEOs were also asked about the key leadership challenges they experience: nearly 60% reported increasing pressure to deliver business results under shorter timelines, while 37% said they are under increasing pressure to hold individual leaders accountable for any corporate misbehaviour.

Desired government priorities

When asked what outcomes should be government priorities, the 165 Hungarian CEOs participating in the survey focused on their employees. They selected the availability of qualified staff; a clearly understood, stable and effective tax system; and the good health and well-being of their workforce.

Dealing with disruption

CEOs’ opinion on responding to disruptions has changed markedly since our last survey. While in 2014 changes in industry regulation and customer behaviour were the least predictable factors, the majority of respondents now think that changes in core production technologies are the most disruptive. More than half of the CEOs in this year’s survey are concerned about an increase in the number of competitors, changes in distribution channels, and changing customer behaviour. (Figure 5)

Globalisation closing and opening the gap

According to Hungarian CEOs, the key benefits of globalisation are easing the movement of capital, people, goods and information, and enabling universal connectivity. However, the majority of respondents agree that globalisation has not helped close the gap between the rich and the poor, nor has it helped improve the integrity and effectiveness of global tax systems. (Figure 6)

“The positive and negative effects of globalisation can be felt in all aspects of life, especially in the economy. Globalisation has helped free up flows of money, people, goods and information, and has contributed to the improvement of infrastructure, data protection, and services. However, the negative effects on the economy are also apparent: for example, it is increasingly difficult to strike a balance between open competition in global markets and more restrictive national legislation,” said Dr. Péter Futó, President of the Confederation of Hungarian Employers and Industrialists (MGYOSZ).

How do CEOs fare in an increasingly digitised world?

We asked CEOs about what they are doing to develop their personal digital skills, and how their work schedule has changed. Nearly half (48%) of CEOs said their work schedule has changed compared to three years ago: 77% complete more tasks digitally, 62% often work away from their workplace, and 46% now travel less for work purposes. Although flexible work is gaining popularity among chief executives, less than 14% reported they are able to take more vacation than in previous years.

The survey also examined CEO’s use of social media channels to gather and share information: 66% said they manage their own public-facing social media accounts, three quarters have a LinkedIn account and 61% are active on Facebook, while only 29% use Instagram.

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